Have IT, will travel
Integrators scour the globe in search of opportunities<@VM>Think globally, act locally<@VM>E-gov proves easier for other countries
- By William Welsh
- Jul 30, 2005
"Governments are interested today in what is happening with other governments and in the transfer of commercial best practices. " ? Suparno Banerjee, EDS
When British authorities needed help matching bodies to missing persons reports following the July 7 London bombings, they turned to a Unisys Corp. software application.
Casualty Web, or CasWeb, helped authorities identify bodies quickly by matching missing person data from family members, survivors and medical authorities with information recovered from the disaster site. It's the same application that British officials lent to New York authorities following the Sept. 11 terrorist attacks four years ago.
"New York Mayor Rudy Giuliani was very close with a lot of the police officials in the United Kingdom, and they gave them the ability to use that application," said Holly Ploog, Unisys vice president and general manager of public sector services.
CasWeb is just one example of how government IT has become a global market, with a growing number of U.S. systems integrators finding rich opportunities abroad to sell advanced technologies to government customers.
In addition to Unisys, companies such as Accenture Ltd., Deloitte Touche Tohmatsu, EDS Corp., IBM Corp. and Northrop Grumman Corp. are pursuing opportunities abroad. Many of these companies report that half of their total government sales come from non-U.S. governments.
Although the United States spends the most by far -- $107 billion across federal, state and local levels, according to IT research firm Gartner Inc. of Stamford, Conn. -- other regions of the world also have plenty of buying power. Europe spends about $79 billion, the Asia-Pacific region spends about $25.5 billion, and Latin American countries account for $11 billion, according to Gartner.
The hottest market sectors include defense and homeland security, health and human services, and tax and revenue, according to analysts and industry experts. Companies also are reporting a strong demand globally for crosscutting solutions, including e-government applications, customer relationship management software and enterprise resource planning software for back-office functions such as finance, human resources and purchasing.
With such thriving government markets, many large integrators prefer to describe themselves as global companies rather than U.S. companies. Unisys has staff and offices in more than 100 countries, New York-based Deloitte has practices in about 50 countries, and EDS does business in 27 countries with three-fifths of its 25,000 public-sector employees located outside of the United States.
"Governments are interested today in what is happening with other governments and in the transfer of commercial best practices. But they want those practices to be localized to their situation and adapted to their regulations." said Suparno Banerjee, vice president and leader of EDS' Global Government Industry.
Of particular interest are solutions that improve citizen services, deliver better health care and shore up homeland security, industry officials said.SMALL WORLD AFTER ALL
The international government IT market is not much different from the U.S. market, analysts and company officials said. Sooner or later, all governments face similar technology challenges, said Greg Pellegrino, Deloitte's global managing director for the public sector.
Although the basic issues facing government vary little from one country to the next, their impact often hits countries at different times.
"We are now seeing many leading governments looking at issues the way the United States looked at them 12 to 18 months ago," Pellegrino said. "You have some trends where one country or part of the world is most affected or takes the lead, then you see that cascade as a business issue that other governments focus on."
One such issue is the need to strengthen business processes. Integrators have found a wealth of opportunities to help defense ministries in Western Europe strengthen their IT infrastructures, business processes and logistics operations, said Massimiliano Claps, public-sector analyst at market research firm International Data Corp. of Framingham, Mass.
For example, Deloitte is a subcontractor to SAP AG of Walldorf, Germany, on an ERP project involving all of Portugal's military branches and defense departments, Pellegrino said. The project is to be completed next year.
IBM has ERP projects with about 24 defense agencies worldwide, said Todd Ramsey, IBM's general manager for global government industry. The company is implementing ERP software for defense departments in Belgium, Canada, Denmark, Israel, Mexico, Singapore, Switzerland, the United Kingdom and other nations.
EDS in March won a 10-year, $4 billion U.K. Ministry of Defence contract for outsourced IT services. EDS officials credited the hard-earned experience the company gained working on the Navy-Marine Corps Intranet contract as a critical factor in the win.
Under the Defense Information Infrastructure (Future) project, an EDS-led consortium will consolidate U.K. networks into a single infrastructure to provide seamless interaction among headquarters, battlefield support operations and frontline forces.
The expansion of NATO and the European Union has created new IT services opportunities for systems integrators to help new member nations that are struggling to meet requirements for participating in the organizations, said Kent Schneider, president of defense enterprise solutions for Northrop Grumman's IT sector in McLean, Va.
"When companies join a new organization, it puts new requirements on them that they cannot satisfy themselves, so they turn to industry to satisfy them," he said.
Schneider's unit, Northrop Grumman IT, under a 21-year contract worth $1.2 billion provides program management and oversight for maintenance and upkeep of the U.K.'s E-3D Sentry Airborne Warning and Control System aircraft, he said.
Northrop Grumman's mission systems unit in Reston, Va., is helping Bulgaria, Romania and Slovakia, nations new to NATO, make their command centers compatible with NATO systems. International sales, which represent about 10 percent of Northrop Grumman's public-sector revenue, are increasingly important to the company, Schneider said.
Northrop Grumman wants to leverage its successes in the United States to win more international business, he said. "Our approach has been one of focusing our efforts ... where there are requirements that are in our core capabilities," Schneider said.GREENER PASTURES
The homeland security market has a greater base overseas, said Bruce McConnell, president of global policy and technology consultancy McConnell International LLC in Washington. Governments overseas have been addressing security concerns longer than has the United States, where it is a relatively new phenomenon, he said.
In the realm of new technologies, "there are more green fields abroad. For them, the war on terror is a matter of degree rather than a new paradigm," McConnell said.
Still, U.S. spending on homeland security dwarfs international spending, said Marty Cole, chief executive of Accenture's global government group.
"The United States is not the only customer focused on homeland security, but its level of investment is without comparison to any other country," he said.
Homeland security spending outside the United States is focused primarily on products and solutions that strengthen border control and biometric features for passport and identification documents, IDC's Claps said.
Justice or public safety departments often award such contracts because, unlike the United States, most other nations don't have separate homeland security departments, said EDS' Banerjee.
Unisys has had success finding homeland security work worldwide, Ploog said. The company offers biometric security solutions to customers in Australia, Chile and South Africa.
Most of the public sector dollars that governments, other than the United States, spend on IT are directed at civilian agency requirements rather than defense needs, said Rishi Sood, a research vice president with Gartner Dataquest of Mountain View, Calif.
"Although global public-sector countries such as France and the United Kingdom focus on defense, it still is not comparable to the United States," he said.
On the civilian side, other countries are spending heavily on health and human services, tax and revenue, and ERP and IT infrastructure services, analysts and industry officials said.
The mature health and human services market around the globe is dominated by a few large players, Claps said. Many of the same systems integrators, such as Accenture, EDS and Unisys, that dominate the U.S. state and local market in these areas have major projects overseas.E-RECORDS ROCK
One hot niche in health care is electronic medical records, Accenture's Cole said.
"Most national governments have a stronger role in governing and administering the health care system than [in the United States], and therefore are more prescriptive about what they want patient records to look like," he said.
Accenture is working on a pair of 10-year contracts worth a total of $3.5 billion with the U.K. National Health Service for a major automation program known as Connecting for Health, Cole said.
The work, being done under contracts from two of the nation's five health care regions, includes software implementations for all medical services and patient records, he said. Similar opportunities are popping up in Australia, Canada, France and Ireland, Cole said.
In the tax and revenue sector, EDS won a 10-year, $480 million project with British Columbia to improve customer service, enhance revenue recovery and collect outstanding debts.
EDS also is working on Mexico's social security system for government employees, and is modernizing the U.K. Department of Works and Pensions' Child Support Agency, which serves 2 million people.
Today, with word about new IT products and solutions traveling so fast, recognition as a global company has distinct advantages when competing for business overseas, IBM's Ramsey said.
"If you can show that you've been involved in doing this in one country, then another country might be interested in doing it, too."
Deputy Editor William Welsh can be reached at email@example.com.
Although many of the marketing strategies that systems integrators use to land business with the U.S. government work equally well abroad, the most successful companies rely on local offices they have established overseas to win new business, according to analysts and industry officials.
Foreign governments do not require U.S. companies doing business with them to establish a separate, legal entity within their borders, but some integrators choose to do so for tactical reasons, analysts and industry officials said.
For example, Unisys Corp. establishes a wholly owned subsidiary in many countries where it works and has local executives run in-country operations, said Holli Ploog, vice president and general manager of public-sector services.
Local knowledge and working with local companies are keys to success in working with other governments, analysts and industry officials said.
Local partners can help companies understand government-to-industry relationships and guide U.S. companies through sticky political issues or regulatory requirements, said Bruce McConnell, president of global policy and technology consultancy McConnell International LLC in Washington.
"The first thing we advise is to get the local relationships in place," McConnell said. "You can't afford to learn all of the ins and outs on your own."
Northrop Grumman Corp. decides whether or not to establish a permanent presence in another country based partly on the duration and number of engagements it has with its government, said Kent Schneider, president of defense enterprise solutions for the company's IT unit in McLean, Va. A local presence is needed when there is a long-term commitment, he said.
"Every country is different. They have different labor laws and different rules for incorporation," Schneider said. "We find other countries' contracting processes are more difficult than [those of] the United States. If you try to bid on a major opportunity, and you try to do it from the United States, you are not likely to be very successful."
Todd Ramsey, IBM Corp.'s general manager for global government, agreed. "It's hard to be viewed as someone who cares about a country if you don't have a long-term presence, and using local partners is mandatory in almost every country," he said.
Although Accenture Ltd. operates its commercial practice in about 50 countries, it only operates its government practice in about 25 countries, said Marty Cole, chief executive of the company's global government practice. The company scrutinizes the business practices and procurement processes of the governments it does business with to ensure they are mature and not prone to corruption.
"We are very focused on countries that have a high degree of professionalism in terms of their procurement practices and the business processes they follow," Cole said. "We do not want to find ourselves in a position where we would have to compromise our standards and practices, so we don't put ourselves in what could be characterized as a precarious position." -- William WelshE-government is one area in which other nations have surpassed the United States since the trend emerged nearly a decade ago.
Australia, Canada, Denmark, Finland, Singapore and other countries have had an easier time implementing e-government primarily because they had fewer issues associated with legacy systems, said Bruce McConnell, president of global policy and technology consultancy McConnell International LLC in Washington.
The e-gov opportunity with national governments worldwide is mostly tapped out, but a thriving opportunity exists with local governments, said Massimiliano Claps, public-sector analyst at IT market research firm International Data Corp., Framingham, Mass.
"Throughout Western Europe, countries have begun to decentralize their governmental process and push services down to the state and local level," Claps said.
To meet this need, integrators are targeting local governments with solutions tailor-made for their needs. For example, Deloitte Touche Tohmatsu of New York is marketing a solution known as eMayor that provides secure Web services for small and medium-sized government organizations, said Greg Pellegrino, Deloitte's global managing director for the public sector.
Although many market opportunities have matured and some of the demand has tapered off, integrators should keep a sharp eye on the growing demand for new technologies in emerging markets. Asia-Pacific nations such as China and India are showing an interest in wireless solutions and voice over IP technology, said Rishi Sood, research vice president with Gartner Dataquest, Mountain View, Calif. "They are willing to jump into these technologies," he said.
Open source also has gained a more secure foothold abroad than in the United States, Sood said. "The appetite for open source in Europe is higher than in the United States," he said. "All of the national chief information officers have issued white papers advocating the use of open source on every new project."? William Welsh